France is upping the stakes in the battle for London's €930 billion a day clearing business

The
financial district of La Defense is seen at dusk near
ParisReuters/Christian
Hartmann

LONDON — One of the most senior officials in European central
banking has staked France's claim to attract the lucrative euro
clearing business after Brexit, saying he can't see how
operations can be allowed to stay in the UK once it has left the
EU.

Villeroy de Galhau, who sits on the governing council of the
European Central Bank, also said that in recent weeks he has had
"numerous and serious contacts" with bankers and other financiers
looking to shift operations from London to France once Brexit
begins in earnest.

He spoke just as the battle to attract clearing houses from
London to continental Europe heats up following news in recent
weeks that the European Commission is working on a means of
stripping clearing from the UK.

Clearing houses in London manage counterparty credit risk, acting
as a middle-man in swaps and derivatives trades to guarantee the
contract in the event that one of the parties involved in the
trade goes bust.

The acceptance of English law and widespread use of English
language has made London a hub for clearing globally, and it
handles more than 70% of the daily euro clearing business,
equivalent to around €930 billion (£792 billion, $995 billion) of
trades per day, according to a House of Lords report.

Those cries have intensified since last June, with influential
politicians from individual EU countries and the European
Commission repeatedly calling for clearing operations to be moved
to continental Europe.

"London clears 18 major currencies and these multi-currency
netting efficiencies meant LCH saved its customers $21 billion in
capital last year. Strip out euro clearing and you lose these
efficiencies, potentially increasing cumulative trading costs by
€100 billion over five years," he wrote in the Times.